Frugal innovation

Say the word ‘frugal’ – and it conjures images of making do, eking out scarce resources, managing on a shoestring. And in the world of innovation there are plenty of examples where this principle has triggered interesting solutions. For example Alfredo Moser’s idea of re-using Coke bottles as domestic lighting in the favelas of Rio has led to its use in around a million homes around the world[1]. And potter Mansukhbhai Prajapati’s Mitticool ceramic refrigerator offers a low cost way of keeping food cold without the need for power.[2]

But frugal is not simply low cost improvised solutions in a resource constrained part of the world[3]. It’s a mind-set with powerful implications for even the most advanced organization. Sometimes crisis conditions and resource scarcity trigger search in new directions, leading to radical and unexpected alternatives.

For example, when Indian eye surgeon Dr Govindappa Venkataswamy retired he wanted to bring safe reliable cataract surgery to the poor in the villages of his home state of Tamil Nadu. The context was not favourable – even by Indian standards the cost of the operation (around $300) put it beyond the reach of millions living close to the poverty line, and there were additional constraints around the availability of skilled staff to carry out the procedure. Undeterred he searched for alternative approaches which could bring the cost down to around $30 – and he found an answer in a surprising place, underneath McDonald’s golden arches. His argument was that the same techniques used for fast food production and service (which relied largely on unskilled labour narrowly trained up in key areas) could apply in eye surgery. His Aravind Clinic was founded in 1976; today it treats upwards of a quarter of a million people every year and has the distinction of having given back sight to over 12 million people around the world who would otherwise have gone blind because they couldn’t afford the operation[4].

What began as a ‘frugal’ innovation has grown into a global system offering some of the best eye care in the world. It has spawned multiple innovations – in education, preventive care, and in replacing expensive replacement lenses with a much cheaper alternative designed for the Indian context. (Aurolab is now the world’s largest producer, exporting to 87 countries).

This new ‘platform’ model of reliable, low cost but safe healthcare has been taken up by others. Devi Shetty, once heart surgeon to Mother Teresa, has been christened the ‘Henry Ford of heart surgery’ for his application of it to complex operations like by-pass surgery. As with Aravind the massive savings in time and cost are not at the expense of quality; his Narayana Hospitals boast quality rates better than many western hospitals. And like Aravind emphasis is on a systems approach often challenging conventional business models for healthcare; for example 12 million farmers now pay a monthly micro-insurance premium of 12 cents to receive widespread healthcare benefits. Using advanced telemedicine means that problems of skill shortages and expert coverage across a vast sub-continent can be dealt with using sophisticated IT infrastructure[5].

Others are imitating this approach – for example in China software giant Neusoft are pioneering the use of advanced telemedicine to help deal with the growing crisis in which 0.5 billion people will need health care. Instead of building more hospitals the plan is to develop an advanced IT-supported infrastructure to offer a network of primary care – a ‘virtual hospital’ model at much lower cost and with much wider outreach.

Whilst frugal innovation is associated with emerging market conditions where purchasing power is low there is also potential for such ideas to transfer back to industrialized markets. GE’s simple ECG machine (the MAC 400) was originally developed for use in rural India but has become widely successful in other markets because of its simplicity and low cost. It was developed in 18 months for a 60% lower product cost yet offers most of the key functions needed by healthcare professionals.

Siemens took a similar approach with its Somatom Spirit, designed in China as a low cost computer body scanner (CAT) machine. The target was to be affordable, easy to maintain, usable by low skilled staff; the resulting product costs 10% of full-scale machine, increases throughput of patients by 30%, delivers 60% less radiation. Over half of production is now sold in international markets. In particular Siemens took a ‘SMART’ approach based on key principles – simple (concentrating on the most important and widely used functions rather than going for the full state of the art), maintainable, affordable, reliable, (fast) time to market.[6]

Rajan Tata pioneered a frugal approach in developing the ‘Nano’ – essentially a safe, reliable car for the Indian mass market. The whole project, from component supply chain through to downstream repair and servicing was designed to a target price of $2500. Early experience has been mixed but it has led others to move into the ‘frugal’ space, notably Renault-Nissan. Building on the success of a ‘frugal’ model (the Dacia/Logan platform in Europe) they established a design centre in Chennai to develop products for the local market. The Kwid SUV was launched in 2016 selling at $4000 and has broken sales records with a healthy order book and despite strong competition.

Its easy to dismiss these examples as relevant only to a low income emerging world – but there are several reasons why this would be a mistake. Frugal innovation is relevant because:

Resources are increasingly scarce and organizations are looking for ways to do more with less. The frugal approach can be applied to intellectual and skilled resources as much as to physical ones – something of relevance in a world where R&D productivity is increasingly an issue. For example the Indian Mangalaayan Mars orbiter spacecraft was successfully launched 2013 at the first attempt. Despite the complexity of such a project this was developed 3 times faster than international rivals and for a tenth of their costs. Its success is attributed to frugal principles – simplifying the payload, re-using proven components and technology, etc.

Crisis conditions can often force new thinking – something which research on creativity has highlighted. So the improvisational entrepreneurial skills of frugal innovators – nicely captured in the Hindi word ‘jugaad’ – could be an important tool to enable ‘out of the box’ thinking

Frugal innovations have a habit of migrating from their original context to other locations where they offer better value. Think about low cost airlines – the model there was essentially one which stripped away all but the essential function of safe travel between two points. Originally targeted at travellers unable to afford mainstream offerings the model quickly disrupted the entire industry.

So how might an organization begin to think about frugal innovation? There are some core principles which help make up the mind-set:

Simplify – not dumbing down but distilling the key necessary functions